UNITED STATES BANKRUPTCY COURT DISTRICT OF RHODE ISLAND FOURTH AMENDED LOSS MITIGATION PROGRAM AND PROCEDURES I. PURPOSE

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1 APPENDIX IX (Rev. 2/14/11) UNITED STATES BANKRUPTCY COURT DISTRICT OF RHODE ISLAND FOURTH AMENDED LOSS MITIGATION PROGRAM AND PROCEDURES I. PURPOSE The Loss Mitigation Program (LMP) is designed to function as a forum for debtors and lenders to reach consensual resolution when a debtor s residential property is at risk of foreclosure. The LMP aims to facilitate such resolution by opening communications between the debtors and lenders decision- makers. While the LMP stays certain bankruptcy deadlines that may delay the normal progress of bankruptcy administration, more importantly, the LMP encourages the parties to finalize a feasible and beneficial agreement under Bankruptcy Court protection, instead of seeking dismissal of the bankruptcy case. II. LOSS MITIGATION DEFINED The loss mitigation process is intended to include the full range of solutions that may prevent either the loss of a debtor s property to foreclosure, increased costs to the lender, or both. Loss mitigation commonly consists of several general types of agreements, or a combination of them: loan modification, loan refinance, forbearance, short sale, or surrender of the property in full satisfaction. 1 The terms of a loss mitigation solution will vary in each case according to the particular needs and goals of the parties. III. ELIGIBILITY The following definitions describe the types of parties, properties and loans that are eligible for participation in the Loss Mitigation Program: 1 This is not intended to be an exclusive list of loss mitigation solutions. 1

2 A. DEBTOR The term Debtor means any individual debtor in a case filed under Chapter 7, 11, 12 or 13 of the Bankruptcy Code, including joint debtors. If the Debtor is represented by counsel, the term Debtor is to be interpreted to include both the Debtor and the Debtor s attorney, unless the Debtor, with the approval of Debtor s counsel, has expressly requested and authorized direct involvement without counsel. The fact that a discharge has entered or that relief from stay has been granted does not prevent a Debtor from requesting Loss Mitigation or prevent the Court from entering a Loss Mitigation Order. However, neither do these actions prevent such Creditors from pursuing their state court rights during the Loss Mitigation period, if they so elect. B. PROPERTY The term Property means any real property used as a principal residence in which an eligible Debtor holds an interest. C. LOAN The term Loan means any mortgage, lien or extension of money or credit secured by eligible Property, regardless of whether the Loan (1) is considered to be subprime or non-traditional, (2) was in foreclosure prior to the bankruptcy filing, (3) is the first or junior mortgage or lien on the Property, or (4) has been pooled, securitized, or assigned to a servicer or to a trustee. D. CREDITOR The term Creditor refers to any mortgage holder, assignee, servicer or trustee of an eligible Loan. A. OTHER CREDITORS IV. ADDITIONAL PARTIES Where necessary or desirable to obtain a global (i.e., more than a two party) resolution, any party may request, or the bankruptcy court may direct that multiple Creditors participate in the loss mitigation process. B. CO-DEBTORS AND THIRD PARTIES Where the participation of a co-debtor or other third party is necessary or desirable, any party may request, or the Bankruptcy Court may direct that such party participate in loss mitigation, to the extent that the Bankruptcy Court has 2

3 jurisdiction over the party, or if the party consents to such participation. C. CHAPTER 13 TRUSTEE It is the duty of the Chapter 13 Trustee under Section 1302(b)(4) of the Bankruptcy Code to advise, other than on legal matters, and assist the debtor in performance under the plan. Any party may request, or the Bankruptcy Court may direct the Chapter 13 Trustee to participate in loss mitigation to the extent that such participation would be consistent with the Chapter 13 Trustee s duties under the Bankruptcy Code. V. COMMENCEMENT OF LOSS MITIGATION Parties are encouraged to request loss mitigation as early in the case as possible, but loss mitigation may be initiated at any time, by any of the following methods: A. BY THE DEBTOR 1. In Section XIII of the Model Chapter 13 Plan (RI Local Form W.1), a Chapter 13 Debtor may indicate an interest in discussing loss mitigation with a particular Creditor. If the box in Section XIII is checked, within seven (7) days of filing the Plan, the Debtor shall serve on the Creditor and its counsel, if known, and file with the Court, a Notice and/or Request for Loss Mitigation (2 nd Amended Form A) together with a Proposed Loss Mitigation Order with applicable deadlines supplied (2 nd Amended Form C). The Creditor shall have fourteen (14) days to object. If no objection is filed, the Bankruptcy Court may enter the proposed order Loss Mitigation Order. 2. Alternatively, a Debtor may file with the Court and serve on the Creditor and its counsel, if known, a Notice and/or Request for Loss Mitigation (2 nd Amended Form A), together with a Proposed Loss Mitigation Order with applicable deadlines supplied (2 nd Amended Form C). The Creditor shall have fourteen (14) days to object. If no objection is filed, the Bankruptcy Court may enter a Loss Mitigation Order. Only one creditor/property may be included on a Request form. Use separate forms for additional creditors (liens). 3

4 3. If a Creditor has filed a motion for relief from the automatic stay pursuant to Section 362 of the Bankruptcy Code (a Lift-Stay Motion ), at any time prior to the conclusion of the hearing on the Lift-Stay Motion, the Debtor may file a Notice and/or Request for Loss Mitigation (2 nd Amended Form A). The Debtor and Creditor shall appear at the scheduled hearing on the Lift- Stay Motion, at which time the Bankruptcy Court will consider the loss mitigation request and any opposition by the Creditor. If the objection deadline in the Loss Mitigation Request expires before the scheduled hearing and no objection is filed, the matter will be automatically removed from the calendar and the parties will be so notified and all pending matters will be continued. B. BY A CREDITOR A Creditor may file with the Court and serve on the Debtor and Debtor s counsel, if any, a Request for Loss Mitigation (Amended Form B), together with a Proposed Loss Mitigation Order with applicable dates supplied (2 nd Amended Form C). The Debtor shall have seven (7) days to object. If no objection is filed, the Bankruptcy Court may enter a Loss Mitigation Order. C. BY THE BANKRUPTCY COURT The Bankruptcy Court may enter a Loss Mitigation Order at any time, provided that the parties bound by said Order (the Loss Mitigation Parties ) have had notice and opportunity to object and be heard. D. OPPORTUNITY TO OBJECT Where any party files an objection, a Loss Mitigation Order shall not be entered until the Bankruptcy Court, after adequate notice, has either held a hearing to consider the objection, or overrules the objection without a hearing for failing to include specific reasons why loss mitigation would not be successful. If a party objects on the ground that loss mitigation has been requested in bad faith, the assertion must be supported by objective reasons, and/or by sworn testimony. This Court s LMP is intended to bring debtors and secured lenders together, hopefully, to reach consensual and mutually beneficial resolutions when residential property is at risk of foreclosure. With this in mind, and consistent with the federal HAMP eligibility requirements that homeowners must be in default or at imminent risk of default, the requirement that debtors make regular mortgage payments during the loss mitigation process will not be automatically 4

5 imposed as a condition to participation in the LMP. To do so would likely be fatal to the viability of most of the federal, state and municipal programs that have been developed in response to the residential foreclosure crisis. To give the Rhode Island Bankruptcy Court Program the best chance of success, parties are advised that objections to Loss Mitigation participation shall be filed by the applicable deadline and must contain specific reasons as to why the secured lender believes that loss mitigation would not be successful. A. DEADLINES B. EFFECT VI. LOSS MITIGATION ORDER A Loss Mitigation Order shall contain deadlines for the following: 1. The date by which the Loss Mitigation Parties shall designate contact persons and disclose contact information, if this information has not been previously provided. 2. The date by which each Creditor must initially contact the Debtor. 3. The date by which each Creditor must transmit information requests to the Debtor. 4. The date by which the Debtor must transmit information requests to each Creditor. 5. The date by which a written report must be filed updating the Court on the status of the loss mitigation. 6. The date when the loss mitigation period will terminate, unless duly extended. Upon the entry of a Loss Mitigation Order, the following shall apply to the Loss Mitigation Parties: 1. Any Lift-Stay Motion filed by such LM Party Creditor prior to or after the entry of the Loss Mitigation Order shall be postponed to a date after the last day of the loss mitigation period, and the stay shall be extended pursuant to Section 362(e) of the Bankruptcy Code. If, however, it appears that such motions are being filed during the LM period primarily to drive up costs to debtors, particularly when a consensual loan modification is in progress, the Court will consider, on a case by case basis, whether such fees and costs are appropriate. If the debtor fails to cooperate in the LM process, the creditor may move to 5

6 terminate the loss mitigation order, and if granted, an expedited hearing on any pending relief from stay motion will be scheduled. 2. In a chapter 7 case, if the Loss Mitigation period is anticipated to continue more than 80 days from the date the chapter 7 petition was filed, debtors may seek to extend the entry of discharge pursuant to Fed.R.Bankr.P. 4004(c)(2), in order that the automatic stay not expire under 11 U.S.C. 362(c)(2)(C). 3. In Chapter 13 cases, the hearing date for confirmation of the plan shall be continued to a date after the last day of the loss mitigation period. The deadline by which a Creditor must object to confirmation shall be governed by local rules (c)(3) and/or (b)(2), as applicable, and calculated from the rescheduled confirmation date. 4. During the Loss Mitigation period, Debtors must stay current with their Chapter 13 plan payments in order to remain eligible for the program. 5. Pursuant to Federal Rule of Evidence 408, all communications and information exchanged by the Loss Mitigation Parties during the loss mitigation procedure are without prejudice, and will be inadmissible in any subsequent judicial proceedings. VII. DUTIES UPON COMMENCEMENT OF LOSS MITIGATION Upon entry of a Loss Mitigation Order, the Loss Mitigation parties shall have the following obligations: A. GOOD FAITH The Loss Mitigation Parties shall negotiate in good faith. A party failing or refusing to participate in loss mitigation in good faith may be subject to sanctions. At any time during the Loss Mitigation Period, a party seeking compliance with deadlines should file a Motion to Compel compliance with the Loss Mitigation Order or seek termination of the Loss Mitigation Order, if appropriate. If a party, instead, chooses to file a proposed Order to Show Cause, said proposed order must be accompanied by an affidavit verifying the facts asserted in the Order to Show Cause. B. CONTACT INFORMATION 1. The Debtor: The Debtor shall provide written notice to each Creditor, indicating the manner in which the Creditor should contact the Debtor, unless the 6

7 Debtor has already done so in the Chapter 13 plan or as part of a request for loss mitigation. 2. The Creditor: Each Creditor shall provide written notice to the Debtor, identifying the name, address, and direct telephone number of the contact person with settlement authority, unless a Creditor has already done so as part of a prior request for loss mitigation. C. STATUS REPORT The Loss Mitigation Parties shall provide a written report to the Bankruptcy Court regarding the status of the loss mitigation, within the time set by the Bankruptcy Court in the Loss Mitigation Order. The Debtor shall be responsible for preparing the initial draft of the Status Report and to forward it to counsel for the LM Creditor at least four (4) business days before the status report is due. The LM Creditor shall submit to the Debtor any revisions to the report at least one (1) day before it is due. One-sided status reports are not acceptable, and will be stricken by the Court. If either party fails to comply with the above requirements, a motion to compel compliance or a motion to terminate loss mitigation should be filed, as appropriate. The status report shall include whether one or more loss mitigation sessions have been conducted, whether a resolution was reached, and whether one or more of the Loss Mitigation Parties believe that additional loss mitigation sessions would be likely to result in either a partial or complete resolution. A status report may include a request for an extension of the loss mitigation period. If the parties jointly continue the status reporting date, the Loss Mitigation period will automatically be extended to that date, unless the Court orders otherwise. Where multiple extensions of time are requested without sufficient explanation for the delay, a hearing will be scheduled. D. BANKRUPTCY COURT APPROVAL The Loss Mitigation Parties shall file a written request for Bankruptcy Court approval of any resolution or settlement reached during the loss mitigation process. See also Section X infra. A. INITIAL CONTACT VIII. THE LOSS MITIGATION PROCESS Within seven (7) days after entry of a Loss Mitigation Order, unless a different deadline is set by the Court, the contact person designated by each Creditor shall contact the Debtor s attorney, or Debtor, if specifically authorized, 7

8 and any other Loss Mitigation Party. The Debtor may contact any Loss Mitigation Party at any time. The purpose of the initial contact is to create a framework for the discussion at the loss mitigation session and to ensure that each of the Loss Mitigation Parties will be prepared to participate meaningfully in the loss mitigation session it is not intended to preclude the introduction of additional issues or proposals that may arise during the session. During the initial contact phase, the Loss Mitigation Parties should agree upon: 1. The time, place and method for conducting the loss mitigation sessions. 2. The types of loss mitigation solutions under consideration by each party. 3. A plan for the exchange of requested information prior to the loss mitigation session, including the due date for the Debtor to complete and return any information request or other loss mitigation paperwork that each Creditor may require. All such information shall be provided at least 7 days prior to the loss mitigation session. B. LOSS MITIGATION SESSIONS Loss mitigation sessions may be conducted in person, telephonically, or via video conference. Prior to the conclusion of each loss mitigation session, the Loss Mitigation Parties should discuss whether additional sessions are necessary and set the time and method for conducting any additional sessions, including a schedule for the exchange of any further information or documentation that may be required. C. BANKRUPTCY COURT ASSISTANCE At any time during the loss mitigation period, a Loss Mitigation Party may request a settlement conference or status conference with the Bankruptcy Court, on any subject dealing with the Loss Mitigation process. D. SETTLEMENT AUTHORITY Each Loss Mitigation Party must have a designated person with full settlement authority present during the loss mitigation session. During a status conference or settlement conference with the Bankruptcy Court, a person with full settlement authority must either attend the conference in person or be available by telephone or video conference 30 minutes prior to the start of the conference. 8

9 IX. DURATION, EXTENSION AND EARLY TERMINATION A. INITIAL PERIOD The initial loss mitigation period shall be set by the Bankruptcy Court in the Loss Mitigation Order. B. EXTENSION 1. Agreement: The Loss Mitigation Parties may agree to an extension of the loss mitigation period, not to exceed 60 days, by filing a request for extension in writing on the docket in the main bankruptcy case and served on all parties in interest. Any objection to such request for additional time shall be filed within three (3) business days of the request. 2. No Agreement: Where a Loss Mitigation Party does not consent to the request for an extension of the loss mitigation period, the Bankruptcy Court shall schedule a hearing to consider whether further loss mitigation sessions are appropriate. The Bankruptcy Court may order an extension if it appears that (1) a further loss mitigation session is likely to provide a substantial benefit to a Loss Mitigation Party, (2) the party opposing the extension has not participated in good faith or has failed in a material way to comply with these Procedures, (3) the party opposing the extension would not be prejudiced, or (4) for other cause shown. C. EARLY TERMINATION 1. Upon Request of a Loss Mitigation Party: A Loss Mitigation Party may request that the loss mitigation period be terminated for cause, and shall state the reason(s) for the request. Except where early termination is necessary to prevent irreparable injury, loss or damage, the request shall be made on notice to all other Loss Mitigation Parties, and if necessary, the Bankruptcy Court may schedule a hearing to consider said request. 2. Dismissal of the Bankruptcy Case: a. Other than at the request of a Chapter 13 Debtor, or on the motion of the United States Trustee, the case trustee, or the Court acting sua sponte, for failure to comply with requirements under the Bankruptcy Code, a case shall not be dismissed during the loss 9

10 mitigation period unless the Loss Mitigation Parties have provided the Bankruptcy Court with an explanatory status report that is approved by the Court. b. Upon the request of a Chapter 13 Debtor: A Debtor shall not be required to request dismissal of the bankruptcy case as part of any resolution or settlement that is offered or agreed to during the loss mitigation period. Where a Chapter 13 Debtor requests voluntary dismissal of the bankruptcy case during the loss mitigation period, the Debtor s dismissal request shall indicate whether the Debtor agreed to any settlement or resolution with a Loss Mitigation Party during the loss mitigation period or intends to accept an offer of settlement made by a Loss Mitigation Party during the loss mitigation period. c. Notice: If a bankruptcy case is dismissed for any reason during the loss mitigation period, the Clerk of the Court shall note on the docket that loss mitigation efforts were ongoing at the time the bankruptcy case was dismissed. X. RESOLUTIONS The Bankruptcy Court will consider any agreement reached during loss mitigation and may approve same, subject to the following: 1. Implementation: A Resolution may be noticed and implemented in any manner permitted by the Bankruptcy Code and Federal Rules of Bankruptcy Procedure ( Bankruptcy Rules ), including, but not limited to, a stipulation, sale, plan of reorganization or amended plan of reorganization. All settlement agreements must be accompanied by a completed and signed Form D, Proposed Loan Modification Agreement. 2. Fees, Costs or Charges: If a Resolution provides for a Creditor to receive payment or reimbursement of any fee, cost or charge that arose from loss mitigation, all such fees, costs or charges shall be disclosed to the Debtor, the Trustee, the U.S. Trustee, and to the Bankruptcy Court prior to 10

11 approval of the Settlement. 3. Signatures: Consent to the Resolution shall be acknowledged in writing by (1) an authorized representative of the Creditor, (2) the Debtor, and (3) the Debtor s attorney, if applicable. 4. Hearing: Where a Debtor is represented by counsel, a Resolution may be approved by the Bankruptcy Court without further notice, or upon such notice as the Bankruptcy Court directs. Where a Debtor is not represented by counsel, a Resolution shall not be approved until after the Bankruptcy Court has conducted a hearing at which the Debtor shall personally appear. 5. Amended Schedules I and J and Amended Plan, if applicable: Within fourteen (14) days after Court approval of a loss mitigation Resolution, the Debtor shall file amended Schedules I and J, and an amended Chapter 13 plan, if applicable. 6. Dismissal Not Required: A Debtor is not required to request dismissal of the bankruptcy case in order to effectuate a Resolution. To ensure that a Resolution is enforceable, the Loss Mitigation Parties must request Bankruptcy Court approval. Where the Debtor requests or consents to dismissal of the bankruptcy case as part of the Resolution, the Bankruptcy Court may approve the agreement as a structured dismissal, if such action complies with the Bankruptcy Code and the Bankruptcy Rules, and does substantial justice between the parties. XI. COORDINATION WITH OTHER PROGRAMS [Provision may be added in the future to provide for coordination with other loss mitigation programs.] XII. EFFECTIVE DATE Pursuant to General Order , the Court s LMP first became effective on November 1, By General Order , the Court issued its First Amended LMP, which took effect on January 15, 2010, on April 1, 2010, by General Order , the Second Amended LMP went into effect, and on August 23, 2010, by General Order , the Third Amended LMP took effect. On February 14, 2011, the Fourth Amended LMP will take effect, amending various sections, as well as Forms A and B. 11

12 UNITED STATES BANKRUPTCY COURT 2 nd Amended Form A FOR THE DISTRICT OF RHODE ISLAND TWO PAGE DOCUMENT x In re: : BK No. Chapter Debtor(s) : x NOTICE AND/OR REQUEST FOR LOSS MITIGATION BY THE DEBTOR I am a Debtor in this case, and hereby request loss mitigation (LM) with respect to [Identify the property, loan and creditor(s) for which loss mitigation is requested]: NAME AND MAILING ADDRESS OF CREDITOR: PROPERTY ADDRESS: Check which applies. Creditor is the holder of the: First Mortgage or Second Mortgage SIGNATURE I understand that if the Court orders loss mitigation in this case, I am required to comply with the LM Procedures, and will participate in LM in good faith. I understand that LM is voluntary, and that I am not required to enter into any agreement or settlement with any other party as part of this LM, and understand that no other party is required to enter into any agreement or settlement with me. I also understand that I am not required to request dismissal of this case as part of any resolution or settlement that is offered or agreed to during the LM period. I also certify that the property in question consists only of real property used as a principal residence in which I hold an interest.

13 I further certify as follows: ( ) I will make my regular current monthly mortgage payments beginning with the payment due on during the LM period. ( ) I propose to make my monthly mortgage payments as follows during the LM period, but I agree that I am still obligated to pay the original amount until modified:. ( ) I propose to make the following monthly payment during the LM period based on my projected loan modification: Sign: Date: DEBTOR INFORMATION: Print Full Name: Mailing Address: Telephone Number: Address (if any): Attorney Information (if any): Name: Address: Telephone Number: Fax Number: Address (if any): Preferred Method of Contact: Debtor s Attorney Debtor Pursuant to Section V of the Loss Mitigation Program, the above named Creditor has fourteen (14) Days to file with the Court and serve on the Debtor and Debtor s attorney, any objection to this Request at: U.S. Bankruptcy Court, District of Rhode Island The Federal Center, 380 Westminster Street, Providence, Rhode Island Rev. 2/14/11 2

14 UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF RHODE ISLAND x In re: : Debtor(s) x BK No. : Chapter Amended Form B LOSS MITIGATION REQUEST BY A CREDITOR I am a creditor (including a holder, assignee, servicer or trustee of a mortgage or lien secured by property used by the Debtor as a principal residence) of the Debtor. I hereby request loss mitigation with respect to [Identify the property and loan for which you are requesting loss mitigation]: Check which applies. Creditor is the holder of the: First Mortgage or Second Mortgage SIGNATURE I have reviewed the Loss Mitigation Procedures, and understand that if the Court orders loss mitigation in this case, I will be bound by the Loss Mitigation Procedures, and will participate in loss mitigation in good faith. If loss mitigation is ordered, I agree to provide the Court with a written or verbal status report stating whether or not the parties participated in one or more loss mitigation sessions, whether or not a settlement was reached, and whether negotiations are ongoing, and I will not require the Debtor to request or cause dismissal of this case as part of any resolution or settlement that is offered or agreed to during the loss mitigation period. Sign: Date: Print Name: Title:

15 Firm or Company: Telephone Number: address (if any): Pursuant to Section V of the Loss Mitigation Program, the above named Debtor has seven (7) Days to file any objection to this Request at: U.S. Bankruptcy Court, District of Rhode Island The Federal Center, 380 Westminster Street Providence, Rhode Island Rev. 2/14/2011